US JOLTS Job Openings expected to edge slightly lower in July

• The US JOLTS data will be watched closely ahead of the release of the August Nonfarm Payrolls report on Friday.

• Job Openings are forecast to edge lower to 7.4 million in July.

• The state of the labor market is a key factor for Fed officials when setting interest rates.

The Job Openings and Labor Turnover Survey (JOLTS) will be released on Wednesday by the United States (US) Bureau of Labor Statistics (BLS). The publication will provide data about the change in the number of Job Openings in July, alongside the number of layoffs and quits.

Markets expect Job Openings to decline slightly to 7.4 million in July, compared to the 7.437 million in June. The JOLTS will be released a few days before another crucial labor report, the Nonfarm Payrolls data for August, due on Friday. The US BLS’s latest employment report showed that Nonfarm Payrolls rose by 73,000 in July, missing the market expectation of 110,000. Additionally, the BLS announced that the change in total Nonfarm Payrolls for May and June was revised down by 125,000 and 133,000, respectively.

JOLTS data is scrutinized by market participants and Federal Reserve (Fed) policymakers because it can provide valuable insights into the supply-demand dynamics in the labor market, a key factor impacting salaries and inflation. Job Openings have been declining steadily since reaching 12 million in March 2022, indicating a steady cooldown in labor market conditions. In January of this year, the number of Job Openings came in above 7.7 million before declining to 7.2 million by March. Since then, JOLTS Job Openings rose for two consecutive months, reaching 7.77 million in May, followed by a drop below 7.5 million in June.

What to expect in the next JOLTS report?

While speaking at the Jackson Hole Symposium on August 22, Fed Chairman Jerome Powell acknowledged that downside risks to the labor market were rising. "Tighter immigration has led to an abrupt slowdown in labor force growth,” Powell added. Similarly, San Francisco Fed President Mary Daly argued that they can't wait for perfect certainty without risking harm to the labor market because it will take time before they know whether tariff-related price increases will be a one-off.

Following the dismal labor market report and dovish Fed comments, investors widely expect the Fed to cut the policy rate by 25 basis points (bps) at the September policy meeting, with the CME FedWatch Tool pointing to a nearly 92% probability.  

Although the market positioning suggests that the US Dollar (USD) doesn’t have a lot of room left on the downside, a significant decline in Job Openings, with a reading at or below 7 million, could reaffirm worsening conditions in the US labor market and weigh on the USD with the immediate reaction. On the other hand, a stronger-than-forecast print is unlikely to alter market expectations of the policy outlook, limiting any potential positive impact on the USD’s performance.

When will the JOLTS report be released and how could it affect EUR/USD?

Job Openings will be published on Wednesday at 14:00 GMT. Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD:

“EUR/USD faces a pivot level at 1.1670, where the 20-day and the 50-day Simple Moving Averages (SMAs) align. On the daily chart, the Relative Strength Index (RSI) indicator stays slightly below 50, highlighting a lack of directional momentum.”

“In case 1.1670 remains intact as resistance, technical sellers could be interested. On the downside, 1.1510-1.1500 (100-day SMA, round level) could be seen as the next support level before 1.1425 (Fibonacci 23.6% retracement of January-July uptrend) and 1.1200 (Fibonacci 38.2% retracement). Looking north, resistance levels could be spotted at 1.1720 (static level), 1.1800 (static level, end-point of the uptrend) and 1.1900 (static level, round level).”